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Pip value for currency pairs

The pip value can be estimated with the help of three methods. It will depend on the trading volume; the choice of calculation method will be reliant on the currency pair:

1. If USD is the second currency in a currency pair (for example, EUR/USD, GBP/USD, etc.) then the pip value in the trade of 1 lot will be equal to $1; if trading volume is 0.1 lot, then it is $0.1, etc.

2. If USD is the first currency in a currency pair (for example, USD/CHF, USD/CAD, etc.) then the pip value in the trade of 1 lot will be 1/(the current exchange rate of a currency pair).

USD/CHF = 1/(USD/CHF) => 1/1.0418 = 0.9598 (trade of 1 lot)

The only exception is the USD/JPY pair with low exchange rate; here you should divide 100 (not 1) by the current exchange rate of the USD/JPY.

USD/JPY = 100/(USD/JPY) => 100/105.06 = 0.9518 (trade of 1 lot)

3. When a currency pair does not include USD (for example, EUR/AUD, CAD/CHF, etc.)

The pip value in the EUR/AUD pair will be equal to a pip value in the AUD/USD pair multiplied by the trade volume. In the EUR/AUD pair, EUR is substituted by USD; thus, you get the USD/AUD pair, which can be referred to as the second method described above and equal to the ratio of 1 to the current exchange rate of the USD/AUD. However, the USD/AUD pair is non-existent currency pair. In order to turn non-existent USD/AUD into the AUD/USD existing pair, it is necessary to divide 1 by the current exchange rate of the AUD/USD. So, the result is as follows:

EUR/AUD = USD/AUD = 1/(1/(USD/AUD)) = AUD/USD => 0.9527 (trade of 1 lot).

You can also use the formulas listed below:

1. XXX/USD

v.p. =1 * (trade volume)

2. USD/XXX

v.p. = 1/(USD/XXX) * (trade volume)

3. AAA/BBB

v. p. =(AAA/USD)/ (AAA/BBB) * (trade volume)


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